World’s Greatest Power Thieves Keep 400 Million Indians in Dark

To run his fan, lamp and small
television, Sikander strings a homemade wire hook over power
cables outside his one-room New Delhi house, helping perpetrate
the world’s biggest energy heist.

“The cables are right there, it’s really easy to take
it,” said Sikander, 26, who uses only one name and earns less
than $2 a day cleaning people’s ears on the streets of the
Indian capital. “You have to be very careful when it rains
because you can get electrocuted tying the wires together.”

About one-third of the 174 gigawatts of electricity
generated in India annually is either stolen or dissipates in
the conductors and transmission equipment that form the
country’s distribution grid, Power Secretary P. Uma Shankar said
in an interview. That’s more than any other nation, according to
a 2010 report by Deloitte LLP analysts that also estimated
India’s losses at 32 percent. In China the rate was 8 percent.

The pilfering of almost enough power to charge California
for a year lowers the annual income of Indian distribution
companies by $16 billion and cuts output by 1.2 percent in the
$1.3 trillion economy, India’s Planning Commission says.

Losses hamper work to bring grid electricity to an
estimated 400 million people living without it and contribute to
what the Central Electricity Authority says is a 10 percent
shortfall in meeting peak power demand.

Reliance, Tata

Now the government is asking companies, including Reliance
Power Ltd. (RPWR) and Tata Power Ltd., to run more of the network that
connects homes, offices and factories with substations. The
goal, Shankar said, is to halve losses by 2013 in a country
where blackouts leave Indians sweating in summer temperatures of
up to 46 degrees Celsius (115 degrees Fahrenheit).

“Electricity theft drags down not just the power sector
but the entire Indian economy,” said Michael Parker, a Hong
Kong-based senior analyst at securities and research company
Sanford C. Bernstein & Co. “Keeping the lights on is
fundamental to economic growth. Failure to do that guarantees
sub-par performance.”

Tata Power and Reliance Power subsidiaries have reduced by
two-thirds the amount of power stolen in the New Delhi network
that they have jointly run since 2002. That hasn’t made them
profitable. BSES Rajdhani Power Ltd., the unit of Reliance Power
that supplies western and southern parts of the capital, says it
is losing $2 million a day due to theft and low government-
imposed rates.

Shares Fall

Shares of Reliance Power, owned by billionaire Anil Ambani,
have fallen 25 percent this year amid a probe by the Central
Bureau of Investigation into the 2008 sale of mobile-phone
permits. The CBI charged three companies, including one
controlled by Ambani’s group. All three deny wrongdoing.

Tata Power’s 9.8 percent drop in the period matched the
decline in India’s benchmark stock index.

“If state electricity boards or private distribution
companies are not able to recover the money, it will result in
them having to default on loans,” Gopal Saxena, BSES Rajdhani’s
chief executive officer, said in an interview. “The credibility
of the entire sector comes into question and new power projects
will not be approved.”

Enforcement officers have stepped up raids across the
capital and cheaters have been offered amnesty if they agree to
install new meters that are harder to tamper with. Still,
illegal cables remain coiled around pylons providing power to
shacks in Sikander’s East Patel Nagar neighborhood, competing
for space with open sewage channels and piles of trash.

“In a government-owned company there can be corruption,
which interferes with the task of reducing theft” as officials
take bribes not to report thieves, power secretary Shankar said.
“Private companies tend to have much better governance and have
very clear targets.”

City Grids

State-run electricity boards deliver 85 percent of India’s
power 19 years after the first private supplier, a subsidiary of
now-defunct Enron Corp., took over distribution in western
Maharashtra state, home to Mumbai. Grids in cities including
Gurgaon, outside Delhi, and Nagpur may be handed to private
companies in the next year, according to Shankar.

“Delhi clearly demonstrates that privatization is the only
way to arrest losses and bring companies into a stage of
financial viability,” said Saxena.

Companies such as Lanco Infratech Ltd. (LANCI) and Torrent Power
Ltd. (TPW) say they want to bid on lease contracts, which enable them
to operate distribution systems without having to buy land and
infrastructure. That model is already used in the city of Agra,
200 kilometers (125 miles) south of New Delhi.

Growth Threat

Prime Minister Manmohan Singh is seeking to secure $400
billion of investment in the power sector in the next five years
as he targets an additional 120,000 megawatts in generation by
2017. India has missed every annual target to add electricity-
production capacity since 1951.

Failure to supply enough power could curb expansion in
India’s economy, Asia’s third-largest, which the International
Monetary Fund estimates may grow 8.2 percent in 2011 from 10.4
percent in the prior 12 months.

Electricity shortages mean the work of BSES Rajdhani’s
Akbar Basha, a 30-year-old enforcement officer who patrols parts
of western Delhi, is needed to help keep lights burning and air-
conditioning units humming.

Basha uses computer software that detects irregular
patterns of power use. For example, a nighttime surge may
indicate a factory operating illegally in a residential area.

It’s dangerous work. In the last three years, he says he
has been accused of sexual assault by a woman whose house he
attempted to inspect and had his car keys stolen and clothes
ripped while confronting power thieves.

On April 29 Basha’s team visited an apartment owned by
Abhay Dev, 57, a hospital technician, where wires and a lump of
metal had been used to bypass the meter. Dev will be fined $340,
twice his annual bill, unless the company accepts his claim this
was done by earlier tenants, Basha said.

“No one ever admits that they were stealing, there’s
always an excuse,” Basha said on the street outside Dev’s
apartment. “People are very smart and always come up with new
technology. It’s a constant game of cat and mouse.”